The Olympic Games in Tokyo (July 23 to August 8) will take place without spectators, and it will not be the last time that sports mega-events are held in front of empty stands. Does this mean the death of sports sponsorship? A Delphi study from WHU – Otto Beisheim School of Management together with Vereinigung Sportsponsoring-Anbieter (VSA) concludes quite the opposite, stating that sports sponsorship will adapt and may even expand further.
This summer marks the 18-month anniversary of the global pandemic. This crisis has put enormous pressure on sports associations, sponsors, and fans. Major leagues and sports mega-events, such as the Olympics now, have had to be played in front of empty crowds. Sponsors suffered from large cuts in marketing budgets, as those tend to be cut first in a crisis. And finally, sports fans may wonder how much damage has been done by all this and what a possible decline in sports sponsorship could mean for them and their beloved sporting events.
Therefore, we asked the question whether this could be the end for sports sponsorship as we know it so far. Looking at the bare figures, the answer might be yes. According to recent studies, the sponsorship volume in sports in 2020, measured in terms of the number of contracts as well as the contract value, suffered a slump of 30 to 40 percent compared to 2019. And the pandemic is not over yet.
However, in our analysis, we did not focus on figures, ratios, dollar-amounts or deal counts representing the current status of the market. In times of significant technological and social disruptions affecting the entire sports industry, we were rather interested in investigating the mid-term future of the sponsorship industry and how all involved stakeholders will have to adapt their strategies to benefit from the underlying market dynamics. In our forward-looking study, we conclude that sports sponsorship could even rise like a phoenix from the ashes as sponsorship adapts greatly to dynamic market trends.
Technology has transformed the sports industry in recent years. Assisting technologies like the Video Assistant Referee in Soccer or the Hawk-Eye in tennis have changed the rules of the game. Moreover, new distribution channels and formats have significantly influenced the way live-sports is consummated by the fans. Through social media, brands were able to drastically increase their reach and therefore boost their global brand image. And the trend is not over yet. New applications like virtual or augmented reality goggles, holograms, or exclusive online contents like the virtual Paddock Club in Formula 1 are digging their ways into people’s daily routines and sports organisations’ sales and marketing departments.
For sports sponsorship, those developments offer significant opportunities. On the one hand, new digital advertising spaces are created, which can be used in addition to the existing physical spaces. Digitization, in turn, also increases the reach of traditional sponsorships by reproducing the same content through multiple channels. On the other hand, sports organisations are in possession of big amounts of first party data. The incorporation of big data analysis for a structured decision making is a necessary step to render sports sponsoring more efficient, more accountable and to make it more comparable to other marketing instruments whose efficiency and reach can be measured and tracked more easily. However, even if sponsorship will likely become more data driven it is still a people business, and this will not change. The human intuition behind sponsorship decisions cannot be entirely replaced by algorithms or any other sort of artificial intelligence.
Further, new players enter the market and force incumbent market participants to rethink future partnerships. Original Equipment Manufacturers (OEMs), digital distribution platforms, data and software providers are only a few examples. In addition to new players enter existing markets, also new markets emerge. The eSports market for instance provides a huge potential to address a completely new customer group or attract an entirely new set of sponsors that has never been involved in traditional sports sponsorship thus enlarging the addressable market and creating new partnerships that might even exist in parallel to the traditional ones.
Lastly, technologies allow fans to be closer to their favourite events, sports, and stars and are therefore the booster to carry emotions out of stadiums and into living rooms, bar, pubs or any other place where people can come together. Sponsorship strategies need to focus on the fact that even when stadiums are empty, emotions are still generated through sports, it is just happening somewhere else. Coca-Cola, Pepsi, Tennent’s, Babybel or even Uber Eats and Deliveroo are just a few examples of engagements where fast moving consumer goods (FMCG) brands increased their sponsoring activity over the past months, proving that the key to success of sponsoring is its ability to quickly adapt to changes and to be close to the consumer – wherever that may be.
Besides the technological aspects, there is one further important trend that is changing the paradigms in the sports industry. Sports carries an immensely important role in society that goes beyond winning or losing on the pitch. Sustainability, fairness, and equality have become important values that sports is expected to represent in all possible aspects and situations. The key benefit for sponsorship activities is that those values are the foundation on which sports is built upon. Therefore, sponsorship represents not only a versatile and powerful marketing instrument, but rather a CSR tool that is well suited to convey messages and partnerships that are centred around sustainability, fairness, and equality. The important part for organizations in the coming years will be to credibly demonstrate the significance of those values in their daily work and future strategies.
Being close to the customer and convey important messages and values requires the ability to tell the right stories in the right way to the right audience. The way partnerships need to be communicated for customers to really identify with brands and the associated messages, will change in the coming years. Therefore, sponsorship packages will experience a shift from mere traditional rights towards a more modern and flexible set of rights including activation rights, a variety content marketing approaches or the use of social media channels. Activation and communication will become increasingly important for both sponsors and rights holders to substantiate the purpose of their partnerships.
Finally, the pandemic has taught an important lesson when it comes to understanding which role sponsorships can play in difficult times. It is obvious, that marketing budgets are under pressure. We saw that, looking at last year’s figures, the sponsoring market has suffered during the pandemic. However, we also experienced that sports was the single best instrument to keep people emotional, passionate and faithful that the crisis can be overcome. Sponsorship is the best instrument to energise brands with this spirit of optimism, to catch all the positive emotions and to pave the way out of those difficult times.
Lately, the Olympic torch arrived in Tokyo and the Olympic flame was lit. It is a symbol for steadiness and continuation, two properties that are highly desirable and difficult to achieve at the same time. According to our study, sports sponsorship incorporates both. Sponsorship in ten years might be quite different from what it is now – new players, markets, partnerships, or purposes might be at its core – but it will stay relevant and continue to exist and to develop. New challenges will surface, new crises will emerge, but its unique power to convey emotions to the fans will be the key property for sponsorship remain an integral instrument the sports industry.
Tips for practitioners
- Data management is becoming the foundation of strategic decision-making for sports organizations. As a decisionmaker, you need to account for that in terms of investments in new technologies, their systems, structures, and processes as well as their human capital.
- New technologies that can transmit emotions to the fans are the driver of sponsoring success. When you can demonstrate convincing use cases as quickly as possible, you will benefit the most.
- The emergence of new markets, players and processes will continue to change the sports eco-system at increasing pace. This offers endless opportunities for innovative partnership-based strategies.
- Since sustainability and equality will increasingly become the focus of society, sport right holders and sponsors need to actively reflect those in their sponsorship partnerships.
Sports sponsorships can be used as an instrument to energise brand images especially in difficult times. With clear concepts and positive emotionality, sport sponsoring can lead out of the crisis.
Literature reference and methodology
Using the Delphi method, the researchers solicited expert opinions in an iterative survey process from industry professionals representing sponsors, rights holders, sports marketing agencies or consultancies.
- Schmidt, S. L./Kurras, L. (2021): Delphi study: Zukunft 2030 – Sportsponsoring im Wandel, Center for Sports and Management research report.
Professor Dr. Sascha L. Schmidt
Sascha L. Schmidt is Director of the Center for Sports and Management and Professor for Sports and Management at WHU – Otto Beisheim School of Management. He is also the Academic Director of SPOAC - Sports Business Academy by WHU. In addition, he is a member of the Digital Initiative at Harvard Business School (HBS), affiliated to the Laboratory for Innovation Science at Harvard (LISH) and a Research Associate at Emlyon Business School Asia. Sascha is co-author of various sports related HBS case studies and one of the initiators and Senior Lecturer of the MIT Sports Entrepreneurship Bootcamp. His research and writings have focused on growth and diversification strategies as well as future preparedness in professional sports.
Lorenzo Kurras is a PhD student at the Center for Sports and Management (CSM) at WHU - Otto Beisheim School of Management. He conducts research in the field of future sports management related topics with the help of Delphi-based scenario analyses. Before his doctorate, he worked as an investment banker at J.P. Morgan’s Telecom, Media and Technology coverage team in London as well as in private equity for the Aurelius group in Munich.